Bitcoin’s bust won’t take down Pierre Poilievre

What a difference three months can make. When Pierre Poilievre walked into a London shawarma shop on March 29 and paid for his meal with Bitcoin, it was just the latest in a string of populist political stunts to drum up support for his leadership campaign. But now, as global cryptocurrency markets continue to melt down, it’s starting to look much more like an albatross than an asset.

That meltdown has already cost crypto investors more than $2 trillion, and it’s claimed a growing roster of casualties ranging from multibillion-dollar hedge funds to the portfolios of thousands of smaller retail investors. But when Poilievre shot his video, he was pitching cryptocurrencies like Bitcoin as a way to “opt out” of the inflation he claimed the Bank of Canada had created.

If his supporters bought that pitch, and many surely did, they unwittingly opted into something else entirely: hyperinflation. Because of the collapse in cryptocurrency value over the last few months, that same shawarma would cost more than twice as much in Bitcoin as it did in late March (the loonie, by comparison, is down less than four per cent versus the U.S. dollar). That’s an effective annualized rate of inflation of over 400 per cent — the stuff of Weimar Germany or Zimbabwe.

Far from being a store of wealth, Bitcoin and other cryptocurrencies have been an incinerator of it ever since Poilievre decided to embrace them.

The problem with tilting at windmills is sometimes, the windmills tilt back. But while there’s plenty of schadenfreude to go around here, there’s also a lot of real financial pain among those who drank too much of the cryptocurrency Kool-Aid. And while you might think that pain would cause those who followed Poilievre’s advice to reconsider the merits of his candidacy, that doesn’t seem to be how it works.

That’s because of something known as the “backfire effect,” which causes people presented with information that invalidates their views to double-down on them instead of changing their minds. This mindset is particularly rampant among cryptocurrency investors, who have coined an acronym for this phenomenon: HODL (hold on for dear life).

The enduring strength of Donald Trump’s political brand in America speaks to just how strong this effect can be. For more than six years now, Americans have seen just how willing he is to lie, cheat or bully his way to the top. And yet, far from undermining his standing among his supporters, that growing mountain of evidence has made them even more loyal and fanatical in their support. Even Trump’s role in an attempted coup after the 2020 election, one that’s being detailed by the Jan. 6 committee, hasn’t broken the fever that still affects millions of Americans.